Autumn Budget 2024

The Autumn Budget 2024, presented by Chancellor Rachel Reeves, introduced several changes that could potentially impact your financial planning, albeit the announcements were not as far reaching as had been feared. Whilst more details will be made available over the coming days and weeks ahead, we have picked out our top five headlines to keep you informed.

Capital Gains Tax (CGT) Increases

The rates for Capital Gains Tax have been increased. For disposals made on or after 30 October 2024, the main rates will rise from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers.

Additionally, the rates for Business Asset Disposal Relief and Investors’ Relief will increase in phases, reaching 18% by April 2026. This change means that individuals and businesses will need to reassess their investment strategies and consider the timing of asset disposals to manage their tax liabilities effectively.

Inheritance Tax (IHT) Threshold

The IHT tax-free threshold will remain frozen until 2030, currently set at £325,000, although increasing to £500,000 for those who leave their home to children and grandchildren subject to certain conditions.

The threshold was already due to remain frozen until 2028, but the change will drag a higher number of estates above it as asset and property values increase over time meaning more estates will owe IHT as a result, at the standard 40% rate.

Business Relief (BR) Investments

The Budget introduces changes to Business Relief (BR) and Agricultural Property Relief (APR). Previously, these assets received 100% relief from IHT. Under the new rules, the first £1 million will remain exempt, but assets above this threshold will be taxed at an effective rate of 20%.

This adjustment also applies to shares in the Alternative Investment Market (AIM). The rate of BR will reduce from 100% to 50% in all circumstances for shares designated as ‘not listed’ on the markets of recognised stock exchanges, such as AIM. Investors should reassess their portfolios and consider the implications for their business and agricultural investments.

ISAs

The ISA regime remains largely unchanged, with the annual subscription limits staying at £20,000 for ISAs, £4,000 for Lifetime ISAs, and £9,000 for Junior ISAs and Child Trust Funds until April 2030.

However, the government has scrapped the proposed British ISA, which would have allowed an additional £5,000 tax-free investment in UK equities following a mixed response to the consultation launched in March.

This stability in ISA allowances provides a continued opportunity for tax-efficient savings and investments.

Pensions

There were concerns that more dramatic pension changes might be announced, such as a cap or removal to the 25% tax-free cash (subject to protections and the lump sum allowance) or a flat rate of income tax relief on contributions but fortunately these did not appear in the Budget, which we consider to be good news.

However, we did see a significant change announced in that pensions passed on will be subject to IHT from April 2027, where currently they are exempt (unless via an older style arrangement e.g. RAC/S226 schemes) and not classed as part of an estate when someone passes away for IHT purposes.

The government published a technical consultation on the policy immediately after the chancellor’s Budget speech and the finer details of how this policy will be implemented and the associated rules and exemptions is a subject we will follow up to provide a greater in-depth analysis of this change and the impact on our clients and their planning.

What this means for you

These changes highlight the importance of proactive financial planning. The increases in CGT and the overhaul of IHT and business reliefs mean that individuals and businesses must carefully consider their investment and estate planning strategies.

The stability in ISA allowances provides a continued opportunity for tax-efficient savings, while the inclusion of pensions in IHT assessments necessitates a review of retirement planning.

Reviewing your planning with your consultant can help you navigate these changes and optimise your financial plan strategies.

If you have any questions or need further assistance, please don’t hesitate to reach out to our team.